Enjoy complimentary access to top ideas and insights — selected by our editors.
After a chaotic year in finance punctuated by a banking crisis, inflation, rising interest rates, and issues surrounding cryptocurrency and cybersecurity, bankers are doing their best to anticipate new challenges that will come in 2024, all while monitoring key races in an election year.
Stablecoins are a type of cryptocurrency tied to a "stable" or traditional currency, making them less volatile, theoretically, than other cryptocurrencies for investors. This year, stablecoins are expected to integrate with consumer platforms, making them more available outside of the traditional world of crypto investors, leading to potentially massive growth. "Stablecoin networks will become some of the most important financial structures in the world," said Jeremy Allaire, CEO of crypto company Circle, during a recent Circle virtual conference.
Regulators and lawmakers may have the biggest influence on stablecoins this year, as the current lack of regulations and differing rules across states could cause hesitancy in adoption. The European Union has already developed regulations that go into effect this year where stablecoin issuers will be required to be licensed in at least one EU country, and to demonstrate an ability to manage redemptions and have sound governance.
Read more: 6 of the biggest threats banks faced in 2023
"The major headline for stablecoins in 2024 is the impending regulations in the U.S.," James Hiester, a principal consultant at Capco, recently told American Banker. "There have always been questions about the collateral backing stablecoins and the nature of that backing. A regulatory framework would provide a way to verify that assets are real."
Throughout 2024, financial institutions are also focused on embracing AI, with about three-quarters of banks and finance firms planning to invest more in technology spending, according to recent research from Arizent, American Banker's parent company. Artificial intelligence was at the forefront of technology discussions in 2023, and it will still be a hot topic this year as almost half of the survey respondents listed AI and machine learning as a top tech spending priority, especially among large national banks and payments companies.
Read more: The Fed says it can regulate stablecoins. So why doesn't it?
But with the rise of technology in banking comes a heightened worry about cyber crime. Ransomware remains a top concern, with nearly half of survey respondents citing enhanced fraud mitigation as a major spending area for their tech budgets. Regulators are also taking note of these new technology developments, especially AI, and providing guidance on cybersecurity. Firms are using this new technology to their advantage in boosting cybersecurity, using AI for anti-money laundering activities, automating filters for phishing messages and using computer hackers to find bugs in their systems.
As 2024 is also an election year, there are many key races that bankers will be watching aside from the presidential race, including the difficult reelection race of Senate Banking Committee Chairman Sen. Sherrod Brown in Ohio.
Read more: Top AI companies join government effort to set safety standards
Catch up on all the developments and news that will shape 2024 for the banking industry.
